This paper provides new evidence on the dynamic dependences of European corporate credit spread in three markets: Bond, Credit Default Swap (CDS), and Asset Swap (ASP). Using daily data from 2005 to 2009, we find that credit spread returns are primarily driven by innovations. The intra-market...

Relative performance is central to investment management and yet relative performance securities do not trade directly. Complex trading strategies must be devised to capture relative gains. This paper introduces a suite of relative performance indexes and index derivatives that offer new and...

This article examines trading behavior in the options market conditioned on mispricing in the underlying stock. We investigate the price equilibrium between the observed equity asset and the options-implied synthetic share as well as the relative divergence between the two prices. We find a...

China launched her warrant market in August 2005 in the split share structure reform of listed companies. As up to now, equity trading on margin and short-sale of any form are still prohibited in China. This warrant market enables investors to trade on information that otherwise might be...

This paper examines how liquidity in two actively traded futures markets was affected by the recent financial crisis. Changes to trading volumes, spreads, the level and shape of order books, and the price impact of a trade document a tremendous withdrawal of liquidity from Eurodollar futures...

A bank's stock price is modeled as a call option on the spread of random assets over random liabilities. The logarithm of assets and liabilities are jointly modeled as driven by four variance gamma processes and this model is estimated by calibrating to quoted equity options seen as compound...

In a well-functioning futures market, the futures price at expiration equals the price of the underlying asset. This condition failed to hold in grain markets for most of 2005-10. During this period, futures contracts expired up to 35% above the cash grain price. We develop a rational...

An analytic study of liquidity limitations point out to option prices increase/decrease via volatility enhancements/suppressions for short and long portfolios respectively. We use asymptotics of long and short expirations along with non-perturbative considerations and present some practical...